February 28, 2008

Pecked to Death by Taxes

Monique Chartier

The broad based tax proposal predicted by many has reared its ugly head on Smith Hill. House Bill 7873, introduced by Representatives Slater, Segal, Ferri, Diaz and Almeida on Tuesday, would lower the state sales tax from 7% to 4.5% but apply to just about every service offered in the state, as well as food and clothing purchases over $150.

This tax would subject advertisers in print and radio and television to the tax. It would subject financial services, pharmaceutical services, Chambers of Commerce dues, professional association dues and other type dues to the tax. If a business outsources its web design, printing, photocopying, landscaping, public relations, advertising, cleaning services, etc, it will be taxed. This tax would also be imposed on personal services, such as haircuts, manicures, golf lessons, entertainment, marina dockings, dance lessons, etc.

... oh, medical and legal services would be exempted. (There are no attorneys serving in the legislature, are there?)

The Northern Rhode Island Chamber of Commerce, which sounded the alarm, is correctly skeptical, especially as

There is no state agency, legislator, tax official or person in general, who can give a true estimate as to how much money the state would realize if this legislation were enacted. The fact is that the fiscal staffs of the Legislature can account for a general estimate of what would be raised by including all sorts of new services subject to the sales tax, but they cannot account for how much revenue would be lost by a slowdown in purchasing, cross boarder purchasing, etc. It is not responsible right now to give a projected figure. (The Chamber maintains that the state could actually lose revenue.)

One would not have thought that this was the wisest course of action to contemplate, in view of Rhode Island's abysmal business tax climate and ranking as the fourth highest taxed overall.

[Thanks to commenter ChuckR for bringing this development to our attention.]

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.


As I mentioned before in Hawaii there is no sales tax. Sales tax is imposed on the individual doing the purchase. Therefore, if anything goes wrong the individual purchaser is at fault and is responsible for the State of RI sales tax which the state must now find that individual to collect the sales tax.

Hawaii has a general exercise tax (4%) which is levied on all goods and services (for profit and non-profit) transactions (prescription drugs are exempt). For profit and non-profit business have the option to pass along to the consumer the 4% general exercise tax on the business gross consumer transactions.

Businesses not consumers in Hawaii are responsible for paying the general exercise tax on all of their consumer transactions.

On the island of Oahu only on Jan 1, 2007 .05% was added to the general exercise tax (making it 4.5%) to fund the $2.64 billion 22 mile East-West elevated high speed light commuter rail transit system to be built (2009) connecting Waikiki Beach, the new second City Kapolei, new University of Hawaii West campus with spurs added (2018) to the Honolulu International Airport and University of Hawaii Manoa main campus thus providing commuter traffic relief (Oahu was voted as having the best bus transit system in USA but people still love their cars).

In Hawaii all business are treated “equal” with the general exercise tax.

It is one of the simplest and fairest ways to tax and the state always gets its tax funds.

Posted by: Ken at February 28, 2008 1:41 AM

Stating the obvious just for the heck of it: The State of Hawaii consists of a group of islands in the middle of the Pacific Ocean. It's a very, very long swim to the nearest state. Because of its location and optimal weather, it's also a top international and domestic tourist destination.

Although Rhode Island has the word "island" in its name, it's not nearly as difficult to escape as Hawaii. We'd better stop acting like we're on an island, or it's going to be a deserted one in the not so distant future.

Posted by: Will at February 28, 2008 2:13 AM

Have you seen H7950 yet?


Posted by: Josh at February 28, 2008 8:14 AM

Although Rhode Island has the word "island" in its name, it's not nearly as difficult to escape as Hawaii
Posted by Will at February 28, 2008 2:13 AM
Thank God!!!
More seriously I should point out that while the horrid bill Monique introduces to us takes effect immediately, the Art Handy version just "promises" to lower the rate in 2012. You can commence laughing now.
Further, the "game" in the Segal, Slater, Diaz bill is to broaden the tax to include essentialy "everything" then return in future years to re-raise the rate to cover "emergency" situations, aka-more cash for the corrupt hacks, welfare witches and public-employee union scum; and yes Michael Morse this includes your union.

Posted by: Mike at February 28, 2008 8:27 AM

So what's keeping me from going to MA to get my web design, photocopying, advertising, etc...?

Posted by: Greg at February 28, 2008 8:38 AM


Your question shows that you are smarter than the whole of the state legislature. Damning you with faint praise, I am.

You are supposed to file use tax declarations - they'll need a whole investigative staff to come after all the violators!

Posted by: chuckR at February 28, 2008 9:31 AM

--You are supposed to file use tax declarations - they'll need a whole investigative staff to come after all the violators!

So? That means hundreds or thousands more more "state job" slots for legislators' family members, and paying dues units for the unions.


I swear the Democrats must solicit for candidates among "special needs" graduates - their stupidity and economic ignorance is breathtaking.

Posted by: Ragin' Rhode Islander at February 28, 2008 11:20 AM

Hmm. From Cranston I'm only 20 minutes from RT 1 in Attleboro and 15 minutes from Seekonk.

I guess the GA will be putting up East German-style 'Tax Checkpoints' on the borders where they'll check our papers and ask if we have anything to declare.

That's the only way they're going to get me to tell them what money I spend out of state.

Posted by: Greg at February 28, 2008 11:30 AM


Actually I think as 44-18-41 is written legal services would be expressly taxed, NOT exempted.

Posted by: Mach at February 28, 2008 1:31 PM

Mach, please see page 1, line 6 of this bill, which exempts medical and legal services.

There are two possible reasons that an exemption on legal services was included in the bill:

#1 - Someone thought such a tax would have a negative impact on the conduct of legal business; that business might be diminished by it. In that case, such a theory would certainly apply to most other businesses and this bill should die immediately.

#2 - Attorneys were simply given preferential treatment by the bill's sponsors.

Posted by: Monique at February 28, 2008 3:03 PM

For the State of Hawaii FY-2006/2007 the 4% general excise and use tax raised $2.55 billion which was 55.72% of the total state general fund per the Department of Taxation Annual report. The Island of Oahu .05% surcharge tax added to pay for the new light rail transportation system, to be constructed, generated an additional $53.8 million in the first 6 months was placed into a restricted account.

The only exemption to the general excise and use tax is prescription drugs. Goods & services purchased “out-of-state” is subject to a 4% use tax. All business operating in Hawaii are treated equally so there is no apparent indication of favoritism or special interest. Plus by applying a single standard to all business eliminates a lot of paperwork and added personnel costs.

Yes Hawaii is one of the remotest places on earth but in 5 ½ hours I can have product & services from the west coast. With the internet, world-wide shopping is a click away so physical boundaries are all but erased.

Why do I bring the comparison of Hawaii and Rhode Island up, because Monique was flabbergasted that someone would suggest taxing additional goods & services? What I’m saying is I now live in that tax environment; if it’s done right the taxes become transparent and it’s no big deal. Hawaii has kept things very very simple. As a matter of fact, State of Hawaii gave back to the people $50 million last year due to excess collections (Female Republican Governor and Democratic General Assembly working together).

If the State of Rhode Island is going to realistically change the state taxation structure then they better study other states before implementing knee jerk legislation. I think the State of RI would be very happy to impose a 4% tax and receive $2.55 billion or 55% of the general fund from one tax resource.

Will, the State of Rhode Island and Providence Plantations does have “Island” and “Plantation” in it. I moved from one Island and Plantation to another Island on a Plantation. Just can’t seem to get away from those words! Tourism is down about 2% over last year.

Posted by: Ken at February 28, 2008 6:16 PM


Sorry, I was looking at H 7950, my mistake.

7950 is just a wee bit more important than 7873.

7873 isn't going anywhere because it is unpackaged. You can't just drop the sales tax rate w/o something to take its place, it won't fly.

7950 is the package deal and it expressly taxes legal services at 2% amongst making many many other changes(Segal, Almeida, and Diaz were sponsors of both).

Posted by: Mach at February 29, 2008 12:02 PM

Hey Mach

I waded thru 7950 in a cursory fashion and saw the services tax plus the increase in income tax from 25% to 27.5% of Federal. Could you summarize what other goodies are in it?

Posted by: chuckR at February 29, 2008 12:35 PM


No I can't, I've only glanced through it briefly. There is a more involved discussion of it on a different blog and links to some documents explaining the rationale behind the bill within the thread over there.

All I know is it makes various tax increases, creates a few new taxes, and has an offset for property taxes that I am told will result in a net savings for property owners who make under about 120k/yr. The size of the tax increases and the things taxed don't seem to be anything astronomical, though I admit, I've yet to read through the documentation on it or thouroughly review the bill yesterday so this is just what I've heard and not what I'm saying it will do.

I'd urge you to check some local sources for information on it, including the ProJo because I don't have off-hand and I'm not very familiar with the bill as a whole.

Tom Sgouros would be the name to look for regarding this bill on the other blog.

Posted by: Mach at February 29, 2008 1:49 PM
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